World's biggest investor sounds warning

BlackRock, the world's biggest investor, has warned that central banks are poised to tighten monetary policy in the Anglo-Saxon countries and China, advising clients to be ready to pull out of global stock markets at any sign of serious trouble.

BlackRock, the world's biggest investor, has warned that central banks are poised to tighten monetary policy in the Anglo-Saxon countries and China, advising clients to be ready to pull out of global stock markets at any sign of serious trouble.

Ewen Cameron Watt, chief strategist for the BlackRock Investment Institute said: "2014 is the year to squeeze more juice out of risk assets. But investors should be ready to discard the fruit when it starts running dry."

The group said that investors had "jumped on the momentum train, effectively betting yesterday's strategy will win again tomorrow", but vanishing liquidity could leave them trapped if the mood changed. "Beware of traffic jams: easy to get into, hard to get out of."

BlackRock, which manages funds worth $4.1 trillion (€2.98 trillion), said the global system was still in the doldrums and far from achieving sustainable recovery. "The eurozone, Japan and emerging markets are all trying to export their way out of trouble. Who is going to buy all this stuff? The maths does not work," it said.

The report said Wall Street was not in a bubble yet but BlackRock's risk indicator -- measuring "enterprise value" against earnings, adjusted for volatility -- was almost as high as it was just before the dotcom bust. "This market gauge sounded the alarm well before the Great Financial Crisis," it said.